What is the price of investment? How are they related? What has to be done to increase investment?
What will be an ideal response?
The real interest rate is the price of investment. Interest rate and investment are negatively related. Because businesses often borrow to finance their investments, and the real interest rate indicates how much firm must pay for that privilege. The lower the real rate of interest, the more investment spending there will be. An investment project that looks unattractive at an interest rate of 10 percent may look highly profitable if the firm has to pay only 6 percent. The most obvious way to increase investment by private businesses is to lower real interest rates.
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Which of the following events would shift money demand to the right?
a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate
In the base year, real GDP ________ nominal GDP.
A. is equal to B. could be greater than or less than C. is less than D. is greater than
According to Michael Porter, there is a strong correlation between _____ and the creation and persistence of competitive advantage in an industry.
Fill in the blank(s) with the appropriate word(s).
All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT
A. a change in productive technology. B. a change in producer expectations of future profit. C. a change in planned capital goods expenditure. D. a change in the real interest rate.